8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 3, 2010

United America Indemnity, Ltd.

(Exact name of registrant as specified in its charter)

Cayman Islands	000-50511	98-0417107
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9002, Cayman Islands	None
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (345) 949-0100

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On May 3, 2010, United America Indemnity, Ltd. (the “Company”) issued a press release announcing the Company’s financial results for its first quarter ended March 31, 2010.

The information in this Current Report on Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

99.1 Press Release dated May 3, 2010.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	United America Indemnity, Ltd.
May 3, 2010	By:	/s/ Thomas M. McGeehan
		Name:	Thomas M. McGeehan
		Title:	Chief Financial Officer

EXHIBIT INDEX

Exhibit No.		Description
	99.1	Press Release dated May 3, 2010.

EX-99.1

Exhibit 99.1

For release:	May 3, 2010
Contact:	Media
	Linda Hohn
	Associate General Counsel
	(610) 660-6862
	lhohn@uai-group.com

United America Indemnity, Ltd. Reports First Quarter 2010 Financial Results

George Town, Grand Cayman, Cayman Islands (May 3, 2010) – United America Indemnity, Ltd. (NASDAQ:INDM) today reported net income for the three months ended March 31, 2010 of $18.9 million or $0.31 per share compared to net income of $7.2 million or $0.20 per share for the same period in 2009. Operating income for the three months ended March 31, 2010 was $7.9 million or $0.13 per share compared to operating income of $13.5 million or $0.38 per share for the same period of 2009.

Selected Operating and Balance Sheet Data

	For the Three Months
	Ended March 31,
(Dollars in millions, except per share data)	2010		2009
Net income	$	18.9	$	7.2
Net income per share	$	0.31	$	0.20
Operating income	$	7.9	$	13.5
Operating income per share	$	0.13	$	0.38

Operating income / (loss), a non-GAAP financial measure, is equal to net income / (loss) excluding after-tax net realized investment gains (losses). A reconciliation of operating income is set forth at the end of this press release.

	As of		As of
	March 31,		December 31,
(Dollars in millions except per share amounts)	2010		2009
Book value per share	$	14.03	$	13.74
Shareholders’ equity	$	850.6	$	832.0
Cash & invested assets	$	1,731.1	$	1,731.3

Selected Financial Data for the Three Months Ended March 31, 2010:

• Net income of $18.9 million or $0.31 per share.

• Operating income of $7.9 million or $0.13 per share.

• Gross premiums written of $92.9 million.

• Current accident year combined ratio of 103.6.

• Calendar year combined ratio of 101.6.

• After tax investment return of 5.2%, including $11.0 million of realized investment gains net of tax.

• Shareholders’ equity growth of 2.2%.

• Book value per share growth of 2.1%.

United America Indemnity’s Combined Ratio for the Three Months Ended March 31, 2010 and 2009

The combined ratio is a key measure of insurance profitability. The components comprising the combined ratio are as follows:

	Three Months Ended March 31,
	2010			2009
Loss Ratio:
Current Accident Year		63.0			61.7
Changes to Prior Accident Year		(4.0	)		(0.9	)
Loss Ratio – Calendar Year		59.0			60.8
Expense Ratio		42.6			39.2
Combined Ratio		101.6			100.0

For the three months ended March 31^st, the calendar year loss ratio decreased by 1.8 points to 59.0 points in 2010 from 60.8 points in 2009.

• The current accident year loss ratio increased by 1.3 points to 63.0 points in 2010 from 61.7 in 2009.

• The property loss ratio increased by 4.3 points to 56.8 points in 2010 from 52.5 points in 2009 primarily due to increased frequency of storms and higher reinsurance costs.

• The casualty loss ratio improved 0.5 points to 67.6 points in 2010 from 68.1 points in 2009 due primarily to the growth and improved performance of the casualty business in reinsurance operations and improved performance in the casualty business in insurance operations.

• A 3.1 point improvement in net loss and loss adjustment expense related to prior accident years. In 2010, $2.8 million of reserves were released due to positive emergence of approximately $2.6 million in casualty lines and approximately $0.2 million in property lines.

For the three months ended March 31^st, the expense ratio increased from 39.2 points in 2009 to 42.6 points in 2010.

• The expense ratio increase is mainly attributable to a decline in net premiums earned and the incurrence of infrastructure costs related to new product development, information technology upgrades, additional office locations, and redomestication.

United America Indemnity’s Three Months Ended March 31, 2010 and 2009 Gross and Net Premiums Written Results by Business Unit

	Three Months Ended March 31,
	Gross Premiums Written				Net Premiums Written
(Dollars in thousands)	2010		2009		2010		2009
Insurance Operations
Penn-America	$	21,886	$	32,338	$	20,659	$	27,156
United National		15,455		15,795		11,462		12,851
Diamond State		16,730		19,487		11,357		15,462
Total Insurance Operations		54,071		67,620		43,478		55,469
Reinsurance Operations
Wind River		38,782		31,568		38,003		31,144
Total	$	92,853	$	99,188	$	81,481	$	86,613

Insurance Operations: Gross premiums written for the three months ended March 31, 2010 decreased 20.0%, and net premiums written for the three months ended March 31, 2010 decreased 21.6%, compared to the same period in 2009. The reduction in gross premium is comprised mainly of the following:

• $3.4 million due to terminated programs and agents.

• A price decrease in aggregate of approximately 2.3%.

• Continued soft market conditions.

Reinsurance Operations: Gross premiums written for the three months ended March 31, 2010 increased 22.9%, and net premiums written increased 22.0% compared to the same period in 2009. The increase in gross and net premiums written is primarily due to new excess of loss and quota share treaties.

# # #

Note: Tables Follow

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UNITED AMERICA INDEMNITY, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars and shares in thousands, except per share data)

	For the Three Months
	Ended March 31,
	2010			2009
Gross premiums written	$	92,853		$	99,188
Net premiums written	$	81,481		$	86,613
Net premiums earned	$	70,788		$	78,540
Investment income, net		14,579			22,177
Net realized investment gains / (losses)		14,204			(8,596	)
Total revenues		99,571			92,121
Net losses and loss adjustment expenses		41,789			47,740
Acquisition costs and other underwriting expenses		30,148			30,814
Corporate and other operating expenses		4,896			3,975
Interest expense		1,739			1,854
Income before income taxes		20,999			7,738
Income tax expense		2,069			723
Net income before equity in net income of partnership		18,930			7,015
Equity in net income / (loss) of partnership, net of tax		(29	)		135
Net income	$	18,901		$	7,150
Weighted average shares outstanding–basic		60,369			35,036
Weighted average shares outstanding–diluted		60,409			35,082
Net income per share – basic	$	0.31		$	0.20
Net income per share – diluted	$	0.31		$	0.20
Combined ratio analysis:
Loss ratio		59.0			60.8
Expense ratio		42.6			39.2
Combined ratio		101.6			100.0

In computing the basic and diluted weighted share counts the number of shares outstanding prior to May 5, 2009 (the date that the common stock was issued in conjunction with the stockholders’ rights offering) was adjusted by a factor of 1.114 to reflect the impact of a bonus element associated with the rights offering in accordance with GAAP.

The loss ratio, expense ratio and combined ratio are non-GAAP financial measures that are generally viewed in the insurance industry as indicators of underwriting profitability. The loss ratio is the ratio of net losses and loss adjustment expenses to net premiums earned. The expense ratio is the ratio of acquisition costs and other underwriting expenses to net premiums earned. The combined ratio is the sum of the loss and expense ratios.

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UNITED AMERICA INDEMNITY, LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)

	As of			As of
	March 31,			December 31,
	2010			2009
ASSETS
Bonds:
Available for sale securities, at fair value (amortized cost: 2010 - $1,495,858 and 2009 - $1,423,050)	$	1,542,805		$	1,471,572
Preferred shares:
Available for sale securities, at fair value (cost: 2010 - $930 and 2009 - $1,509)		2,230			2,599
Common shares:
Available for sale securities, at fair value (cost: 2010 - $54,420 and 2009 - $50,709)		68,332			63,057
Other invested assets:
Available for sale securities, at fair value (cost: 2010 - $4,255 and 2009 - $4,323)		5,448			6,854
Securities classified as trading, at fair value (cost: 2010 - $1,100 and 2009 - $1,145)		1,100			1,145
Total investments		1,619,915			1,545,227
Cash and cash equivalents		111,146			186,087
Agents’ balances		68,758			69,711
Reinsurance receivables		520,708			543,351
Federal income taxes receivables		397			3,521
Deferred federal income taxes		14,822			13,819
Deferred acquisition costs		33,658			33,184
Intangible assets		9,218			9,236
Prepaid reinsurance premiums		12,743			16,546
Other assets		25,276			25,098
Total assets	$	2,416,641		$	2,445,780
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses	$	1,232,641		$	1,257,741
Unearned premiums		138,472			131,582
Ceded balances payable		2,026			16,009
Contingent commissions		5,477			11,169
Notes and debentures payable		121,498			121,569
Payable for securities		35,975			37,258
Other liabilities		29,949			38,476
Total liabilities		1,566,038			1,613,804
Shareholders’ equity:
Common shares, $0.0001 par value, 900,000,000 common shares authorized; Class A common shares issued: 42,581,491 and 42,486,690, respectively; Class A common shares outstanding: 36,508,960 and 36,430,477, respectively; Class B common shares issued and outstanding: 24,122,744 and 24,122,744, respectively		7			7
Additional paid-in capital		620,444			619,469
Accumulated other comprehensive income		47,352			48,481
Class A common shares in treasury, at cost: 6,072,531 and 6,056,213 shares, respectively		(100,840	)		(100,720	)
Retained earnings		283,640			264,739
Total shareholders’ equity		850,603			831,976
Total liabilities and shareholders’ equity	$	2,416,641		$	2,445,780

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UNITED AMERICA INDEMNITY, LTD.
SELECTED INVESTMENT DATA
(Unaudited)
(Dollars in millions)

	Market Value as of
	March 31, 2010		Dec 31, 2009
Fixed Maturities	$	1,542.8	$	1,471.6
Cash & cash equivalents		111.2		186.1
Total bonds and cash and cash equivalents		1,654.0		1,657.7
Equities and other invested assets		77.1		73.6
Total cash and invested assets	$	1,731.1	$	1,731.3

	Three Months Ended
	March 31, 2010 (a)
Net investment income	$	12.3
Net realized investment gain		11.0
Net equity in net loss of partnerships		(0.1	)
Net unrealized investment loss		(1.0	)
Net realized and unrealized investment gains		9.9
Total investment return	$	22.2
Average cash and investable assets (b)	$	1,694.6
Total investment return % annualized		5.2	%

(a)	Amounts in this table are shown on an after-tax basis.
(b)	Simple average of beginning and end of period, net of payable for securities.

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UNITED AMERICA INDEMNITY, LTD.
SUMMARY OF OPERATING INCOME
(Unaudited)
(Dollars and shares in thousands, except per share data)

	For the Three Months
	Ended March 31,
	2010		2009
Operating income	$	7,908	$	13,471
Adjustments:
Net realized investment gains / (losses), net of tax		10,993		(6,321	)
Total after-tax adjustments		10,993		(6,321	)
Net income	$	18,901	$	7,150
Weighted average shares outstanding – basic		60,369		35,036
Weighted average shares outstanding – diluted		60,409		35,082
Operating income per share – basic	$	0.13	$	0.38
Operating income per share — diluted	$	0.13	$	0.38

In computing the basic and diluted weighted share counts the number of shares outstanding prior to May 5, 2009 (the date that the common stock was issued in conjunction with the stockholders’ rights offering) was adjusted by a factor of 1.114 to reflect the impact of a bonus element associated with the rights offering in accordance with GAAP.

Note Regarding Operating Income

Operating income, a non-GAAP financial measure, is equal to net income excluding after-tax net realized investment gains (losses). Operating income is not a substitute for net income determined in accordance with GAAP, and investors should not place undue reliance on this measure.

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About United America Indemnity, Ltd.

United America Indemnity, Ltd. (NASDAQ:INDM), through its several direct and indirect wholly owned subsidiary insurance and reinsurance companies, is a national and international provider of excess and surplus lines and specialty property and casualty insurance and reinsurance, both on an admitted and non-admitted basis. The Company’s four principal divisions include:

• Insurance Operations:

• Penn-America, which includes property and general liability products for small commercial businesses distributed through a select network of wholesale general agents with specific binding authority;

• United National, which includes property, general liability, and professional lines products distributed through program administrators with specific binding authority;

• Diamond State, which includes property, general liability, and professional lines products distributed through wholesale brokers and program administrators with specific binding authority.

• Reinsurance Operations:

• Wind River Reinsurance Company, Ltd., a Bermuda based treaty and facultative reinsurer of excess and surplus lines and specialty property and casualty insurance.

For more information, visit the United America Indemnity, Ltd. website at www.uai.ky.

Forward-Looking Information

This release contains forward-looking information about United America Indemnity, Ltd. and the operations of United America Indemnity, Ltd. that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,” or “anticipate” or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or consequences of the transactions, and statements about the future performance, operations, products and services of the companies.

The business and operations of United America Indemnity, Ltd. is and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: (1) the ineffectiveness of United America Indemnity, Ltd.’s business strategy due to changes in current or future market conditions; (2) the effects of competitors’ pricing policies, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products; (3) greater frequency or severity of claims and loss activity than United America Indemnity, Ltd.’s underwriting, reserving or investment practices have anticipated; (4) decreased level of demand for United America Indemnity, Ltd.’s insurance products or increased competition due to an increase in capacity of property and casualty insurers; (5) risks inherent in establishing loss and loss adjustment expense reserves; (6) uncertainties relating to the financial ratings of United America Indemnity, Ltd.’s insurance subsidiaries; (7) uncertainties arising from the cyclical nature of United America Indemnity, Ltd.’s business; (8) changes in United America Indemnity, Ltd.’s relationships with, and the capacity of, its general agents; (9) the risk that United America Indemnity, Ltd.’s reinsurers may not be able to fulfill obligations; (10) investment performance and credit risk; and (11) uncertainties relating to governmental and regulatory policies. The foregoing review of important factors should be read in conjunction with the other cautionary statements that are included in United America Indemnity, Ltd.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as well as in the materials filed and to be filed with the U.S. Securities and Exchange Commission (SEC). United America Indemnity, Ltd. does not make any commitment to revise or update any forward-looking statements in order to reflect events or circumstances occurring or existing after the date any forward-looking statement is made.

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